Flowers Foods has signed a definitive agreement to purchase gluten-free baking company Canyon Bakehouse for around $205m.

The purchase amount includes a performance-based contingent payment of $5m.

Regulatory approval and customary closing conditions have been met and the deal is expected to close in the fourth quarter of 2018.

Canyon Bakehouse provides a host of 21 gluten-free buns, bagels, breads, English muffins and speciality items.

Around 90% of its sales are sold as frozen products to natural and speciality retailers, while the remaining 10% is sold fresh.

The company was founded by Josh Skow, Christi Skow and Ed Miknevicius in 2009 after Mrs Skow was found to be suffering from celiac disease.

Canyon Bakehouse employs 206 people and operates a 165,625ft² bakery facility with two production lines in Johnstown.

Following the completion of the deal, Mr Skow will continue to lead the business as president, while Mrs Skow will act as brand ambassador.

Flowers president and chief executive officer Allen Shiver said: “Canyon Bakehouse is an innovative leader in a growing segment of the bakery category, which closely aligns this acquisition with our strategic goals.

“They have great products, a talented team of employees, a state-of-the-art gluten-free bakery and a brand with an enthusiastic fan following. We see opportunities to leverage Flowers Foods’ distribution network and retail partnerships to drive growth by bringing Canyon Bakehouse products to more consumers across the country.”

Canyon Bakehouse CEO and founder Josh Skow said: “Since the beginning, the mission of Canyon Bakehouse has been to help those who have given up gluten to love bread again.

“We are tremendously pleased with the brand, the products and the teams that we have developed and grown over the past nine years, and we are thankful for the many partners who have helped us along the way. We are now very excited about the opportunities for our company alongside Flowers Foods. With Flowers’ national reach, we will be able to bring our gluten-free products to many more consumers.”

Since 2014, Canyon Bakehouse has reported compound annual net sales growth of around 45%. It anticipates 2019 sales to be anywher between $70m and $80m.

The transaction will be funded by Flowers with cash-on-hand and existing credit facilities.

Flowers expects the transaction to be accretive to fiscal 2020 earnings.

Deutsche Bank is serving as financial advisor and Jones Day as legal counsel to Flowers Foods. Integris Partners is the financial advisor to Canyon Bakehouse, while Brownstein Hyatt Farber Schreck is the legal counsel.